Responding to the Public Accounts Committee’s Report on HMRC’s performance in 2016-17, John Cullinane, CIOT Tax Policy Director, said:

“HMRC have clearly believed for some time that the impact of small and medium-sized enterprises (SMEs) on the Tax Gap is especially significant. The nature of this issue merits a more detailed explanation from HMRC than the tax authority shares at present. Without more granularity on the nature of the impact on the Tax Gap, HMRC risk stigmatising SMEs, which could be unfair and does not seem calculated to improving whatever underlying behaviour is the cause of the problem. It is also unhelpful to the public’s understanding of tax. If more focussed information on SMEs and the Tax Gap is simply not available to HMRC, then more needs to be obtained, so targeted initiatives can begin, which we would be keen to support.

“For example, we are still awaiting publication of the final report following the Business Records Checks initiative, which would both indicate the extent to which inadequate record keeping contributes to the Tax Gap and provide more information on the nature of the errors.

“HMRC’s statistics on customer service and call handling which show a clear improvement warrant further investigation to see if this is because, in part, some services have been switched off. For example, early in 2017 HMRC stopped providing pay and tax details over the phone to agents, because HMRC were being flooded with calls, but they did this before a suitable alternative arrangement was made available. This risks HMRC being seen to say that customer service has improved, when in fact in some areas they are simply providing less of a service.”